American Connector Company Case Study

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Q1 How serious is the threat of DJC to American Connector Company?
Answer - The threat of DJC to American Connector Company is very high. Following are the reasons:

Ø If DJC sets up manufacturing base in USA, as per the exhibit 7 and exhibit 8 the raw material cost for DJC in USA will drastically reduce. Current Raw material product and packaging cost is 14.89 which will reduce to 8.93 in USA.As the raw material cost is almost half of the total finished goods cost, the raw material cost reduction would be substantial. Cost head | KAWASAKI ($/1000 Units) | PLANT IN USA | Raw material, Product + Packaging | 12.13+2.76=14.89 | 14.89 * 0.6 =8.93 |

Ø As
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If we take into account cost indices of US VS JAPAN and above cost factors, cost of manufacturing operations of DJC in US would be as low as 25% of the current production cost of 26.10 $.


Q3: What accounts for these differences? How much of the difference is inherent in the way each of the two companies competes? How much is due strictly to differences in the efficiency of the operations?


a) There are many reasons for these differences:

Ø Fixed Asset utilisation: Due to continuous factory runtime, the overall utilisation of fixed asset increases for DJC Kawasaki in comparison ACC Sunnyvale’s plant.
Ø Raw material cost: In Japan raw material cost is twice as much high as in America.
Ø Production Process: Due to batch production system in ACC, there were changes required in production line every time product was changed which lead to less efficiency and lower expertise in churning out a product. This issue was not there with DJC continuous production process with lesser number of product variations.
Ø Quality issues: The number of defective finished goods is very less for DJC when compared to ACC.

b) The basic differences are:

Ø Technological Advantage: In house R&D team which was bringing difference in terms of
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